Conditions ideal for trusts: Charter Hall

Charter Hall Group
is set to launch additional unlisted property trusts as the company takes advantage of what it sees as the most positive asset buying conditions since the mid-1990s.

Joint managing director
David Harrison
said the listed property company was particularly interested in forming an ­industrial trust, amid the most positive buying conditions in some time, with a strong economy, good yields and high occupancy rates.

“This is probably one of the better buying opportunities that we’ve seen since the mid-1990s.

Mr Harrison said this was ­evident in Charter Hall Retail REIT’s purchase, in conjunction with Charter Hall’s renamed unlisted vehicle, Core Retail Fund, of a Lake Macquarie shopping mall from a Centro trust for a ­total of $66 million. It was bought on an initial yield of 8.75 per cent, after previously peaking at 6.75 per cent.

Mr Harrison said the investor appetite for unlisted funds seemed to be returning.

“I think the investors are ­going to be cautious in the recovering market, tough time in listed and unlisted in past few years. But investors, [both] wholesale and retail, are seeing signs of ­recovery as property values start to rise," he said.

Mr Harrison said market conditions for industrial assets were more positive than retail assets.

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“There’s probably even less ­investor competition in the ­industrial market than in the ­retail," he said.

The company has already bolstered its trust offering with the acquisition of two of Macquarie Group’s real estate platforms, which involved two listed and three unlisted funds.

Mr Harrison said the integration of the former Macquarie funds into Charter Hall was ­going well, and 95 per cent of the funds’ staff had been retained.

“Both sides of the staff have embraced the integration," he said.

“We’re quite pleased with the way things are moving forward."

Mr Harrison said the company had decided to restructure the Core Retail Fund because it launched the fund at a particularly weak point in the property cycle, in mid-2008, and had not attracted as much outside investment as it had hoped. Charter Hall Group still holds 66 per cent of the trust and it is aiming to attract more retail investors.

In addition to a half-share in the Lake Macquarie centre, the trust has also agreed to buy an investment property at Stafford for $11.2 million and granted the Charter Hall Retail REIT exclusive due diligence on assets in Nunawading and Stafford.